HC 3

Question 1

Externality

Answer 1

A cost or benefit caused by an economic actor that is not suffered or enjoyed by that same actor

Question 2

IWAs’ two building blocks

Answer 2

Integrated P&L:
expands a traditional profit & loss by taking into account value created for all stakeholders in the form of the six capitals (financial, manufactured, intellectual, social, human & natural)

Integrated balance sheet:
Expands a traditional financial balance to include stakeholder value created over a longer term

Question 3

Challenges IWAs

Answer 3

governance = input/process (not output measure)
Monetization of externalities
- measurement approach (judgement, practical challenges)
- Involves fictitious counterfactual quantities: avoidance costs (ex-ante) vs remediation costs (ex-post)
Selection of reference scenario

Question 4

Integrated reporting

Answer 4

Integrated Reporting aims to provide information about the linkages between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates

Question 5

GHG emissions (3)

Answer 5

Scope 1: Direct emissions from sources that are owned or controlled by a company, such as its production and transportation equipment.

Scope 2: Emissions at facilities that generate electricity bought and consumed by the company.

Scope 3: Emissions from upstream operations in a company’s supply chain and from downstream activities by the company’s customers and end-use consumers.

Question 6

Value added =

Answer 6

Net contribution = value of output produced - value of intermediate goods and services

Question 7

Advantages of E-liability accounting

Answer 7

• Elimantes double/triple… counting inherent in scope 3 measurement
• Prevents outsourcing of Scope 1 emissions to Scope 3 (with lack of reporting)
• Materiality based on magnitude of E-liabilites instead of scope of reporting based on vague impact materiality or even only on financial materiality
• Simplifies auditing

Question 8

BSC

Answer 8

BSC translates strategy and mission of a firm in specific KPI (scorecard)

Different leading non-financial and lagging financial KPI and different perspectives are used in a balanced way to measure the short- and long-term performance of a firm

Assumes causal relationships between four perspectives
* Financial
* Customer
* Internal
* Innovation and Learning

Question 9

(S)BSC can bring a particular problem: Common Measure Bias

Answer 9

• Comparing unique measures cognitively harder than common measures
• Usually, non-financial leading factors more unique, financials more common
• This might lead to a relative neglect of non-financials ex post and ex ante
• Works against the whole idea of emphasizing non-financial driving factors